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Our view: Don't fall for Internet tax

We should not be wasting our time arguing over whether or not to tax e-commerce; the sales tax is dead either way. The coming battle will be over cuts in government spending versus alternative sources of state government revenues.
— Richard W. Ault and David N. Laband
The Freeman, May 2000

The Daytona News Journal’s editorial board quizzed Florida Gov. Rick Scott on his position on this issue earlier this week, and Scott, to his credit, said:

“It’s not fair. You shouldn’t be treated differently, whether you’re selling online or in bricks-and-mortar. But, at the same time, my focus is not to do it where we raise taxes. I don’t want to take money out of the private sector … If it’s out of your pocket, that’s a tax,” he said.

While the governor said “no” to requiring the sales tax on Internet sales, two bills will be pending in the Legislature early next year called the “Streamlined Sales and Use Tax Agreement.” If approved, these bills would include Florida in a compact of states that want to impose collecting the sales tax on out-of-state online retailers.

Strongly supporting this effort are the Florida Retail Federation and the Florida Chamber of Commerce. They have the Florida Alliance for Main Street Fairness, which maintains that it’s not fair for companies such as Amazon.com not to collect the Florida tax and remit it to the state.

Even on the national level, the International Council of Shopping Centers published a full-page ad in the Wall Street Journal Tuesday urging adoption of bills in Congress giving states the right to demand online retailers collect sales taxes.

Lawmakers the culpritsDon’t fall for this cloak of “Main Street,” apple pie, fairness and a “level playing field.” There is much more to this issue than what appears to be a matter of simple inequity — that one group of retailers (online) is favored at the expense of another (brick-and-mortar). The Main Street retailers, of course, contend they are being penalized and losing business because of the sales taxes they must collect.

But rather than make the online out-of-state retailers the bad guys, the Main Street retailers should be pointing at their lawmakers, the people who are forcing Main Street retailers to collect the state’s taxes. Remember: The retailers are the middlemen, forced by government to collect the taxes at the point of sale. Eliminate sales taxes, and the problem goes away.

Of course, that would never happen. For starters, no one has devised a more efficient tax-collection system. In addition, virtually every state with sales taxes has made its system so fraught with special exceptions that simplifying the sales-tax system would be like sending it to the congressional super committee — doomed to failure.

Here’s another argument, perhaps the most compelling for not forcing Amazon to collect Florida’s sales tax: Taxation without representation. As Adam Thierer of the Heritage Foundation has noted: “… Out-of-state vendors of electronic commerce … would receive none of the benefits for the taxes they paid to state and local governments where they did not reside.”

Indeed, why should Amazon.com, whose primary offices are in Seattle, collect and pay Florida’s sales taxes when it would receive no services or benefits from them?

Think about it: Those sales taxes are collected in Florida because that money is used by the state to provide public services to Florida residents. Put yourself in Amazon’s shoes. How would you react to collecting sales taxes for the state of Washington and sending that money there?

SSUTA: Dangerous cartelBe wary also of the groups advocating the “Streamlined Sales and Use Tax Agreement.” This is the proverbial wolf in sheep’s clothing. Its proponents see it as a system whereby states can bring uniformity to sales-tax systems across state lines and impose uniform collection systems on interstate commerce through state compacts.

But if you read the fine print of how the Streamlined Sales and Use Tax Agreement would work, you would immediately see that it would become the equivalent of creating a new European Monetary Union — complete with a new bureaucracy. This board would consist of four representatives from each member state, oversee administration of the compact, have the power to employ staff, advisers and consultants, promulgate rules and procedures it deems necessary and, as is now proposed, would “take any action that is necessary and proper to fulfill the purposes of the agreement” and “allocate the cost of administration of the SSUTA among member states.

Free-market analysts describe this system as a “cartel” and collusion that would not benefit taxpayers. You can just imagine how the bureaucracy would grow.

By all means, we’re abiding supporters of Main Street retailers — as well as supporters of online retailers. They all provide great benefits to consumers.

The question is how best for states to collect the taxes that cover the costs of the services the public demands.

Heretofore, governments have focused on imposing the sales tax at the point of its usage or destination. For instance, if you buy an item from Amazon.com, the tax fairness people contend the tax dollars should flow to the state of the end user.

But there is growing acceptance that a better, more efficient methodology is to impose the sales tax at the point of origin and keep the money at the point of origin.

It makes sense. For instance, when you physically buy a book at a Georgia bookstore, you pay the Georgia tax, and that money stays in Georgia. Likewise, if you buy that book from an online Georgia store from your Florida-based computer, why shouldn’t that tax money stay in Georgia as well?

Origin-based, sales-tax collections would benefit consumers and states alike — although politicians don’t like the idea. Origin-based collections would create sales-tax competition among the states. Companies would shop around to locate their operations where they can find the most-favored tax climates. This in turn would force states to watch their spending — certainly a benefit to taxpayers. And lastly, origin-based tax collections would level the playing field.

We hear Florida lawmakers are not likely to address this issue in the next session. Good thing. As you can see, there is much more to it than just taxing Amazon.com.

+ How Europe affects youSorry, the following is rated “DT” — for depressingly truthful.

While it’s difficult for Americans to comprehend how the complex European debt crisis affects us, we all should be casting a wary, nervous eye to Europe — kind of like watching whether a chained dog is suddenly going to leap at you.

Here’s the fear among increasing numbers of world economic watchers: When will the merry-go-round stop? At what point will the bankrupt European governments of Portugal, Spain, Italy and Greece be unable to raise enough cash by selling bonds to pay their obligations?

And as the buyers of those bonds increasingly demand to be paid higher interest rates for taking the risk to buy the bonds, the greater the pressure grows for those governments to be unable to meet all of their loan payments and entitlement and public-services obligations to their countrymen.

In short, it’s like the U.S. housing bubble. When consumers owed far more than what they could afford and pay each month, they walked away from their debts. The housing market and U.S. economy crashed. European governments are in the same position — “under water.”

And so is our government. The fear in the United States is as Privateer editor William Buckler recently noted:

“The establishment in the U.S. — and both political parties — knows full well that if Europe goes, the U.S. will follow. There is no difference whatsoever between the debt paper created by the U.S. Treasury and the debt paper created by the Euro nations or any other nation in the world. The U.S. government bought time with its ‘super committee.’ That time is up…”

“… The problem the world faces today is that the unfinished transactions — the amount of debt which has been ‘contracted for’ — cannot be made good without inflating the quantity of ‘money’ necessary to the point where it no longer functions as a medium of exchange. That being the case, the only remaining options are a default on the debt or the destruction of the money,” Buckler writes.

A default on debt would mean that anyone who bought the billions of dollars worth of bonds would lose huge amounts of their money. Harsh recession and higher unemployment would follow. The destruction of money would lead to hyper-inflation. Your dollars would buy less and less as the governments simply print more paper money to cover their debts.

To make matters worse, one of the options considered in Europe is to keep the bankrupt countries afloat by lending them more money from the International Monetary Fund. And from where does the IMF get its money? Seventeen percent comes from U.S. taxpayers. Which means U.S. taxpayers would be assisting in the bailout of the bankrupt European countries.

How do we avoid these calamities?

The biggest Christmas gift of all that Congress could provide would be a sudden halt in the growth of U.S. debt and spending. Better still a real reduction in spending.

Dream on. If Barack Obama were the leader he pretended to be, he would be working overtime to craft choices that would calm world markets. But as New Jersey Gov. Chris Christie said this week: “What are we paying this guy for?” “Ditto” for Congress.

Brace yourselves. Keep a wary eye on Europe.

GATOR NATION GROWLS Many of the University of Florida’s faithful football boosters are in an uproar over former Gator coach Urban Meyer signing on with the Ohio State University.

But they should put themselves in his shoes. Even though you said a year ago you were quitting your job at UF to spend more time with your family, when you suddenly found yourself offered one of the premier college-football coaching positions in the country and $40 million, what would you do? Say “no thanks”?
Don’t begrudge Meyer.

We likely will never know the whole story behind Meyer’s leaving his Gator job. That is, until he writes his tell-all book, which, no doubt, will come as long as he is as successful at Ohio State as he was at UF.

But it could be as simple as this: A lot of retired business executives find out that when they retire to spend more time with their families, it’s great for six months. But after six months, their spouses and family members can’t stand to have them around the house. Maybe it wasn’t Meyer who wanted a job; maybe it was his wife who wanted him to get one!

Suffice it to say, Meyer’s going to OSU gives both teams — Gators and Buckeyes — a good reason to put each other on their annual schedules. If you think the Gators and Seminoles are raucous grudge matches, wait until the Buckeyes come to the Swamp.